In an exhibition hall at the far southeast corner of the Houston rodeo, amid the din of bid calls and a mishmash of cowboy hats, blue jeans and handshakes, the serious business of an industry in pain rattled into uncertainty.

Cracked earth was still on the minds of the ranchers on hand, many of whom had struggled through a drought that ravaged their land and thinned herds, leaving visible effects on the main events of the week: cattle auctions for companies that feed the beef industry.

Ken O'Rear of Houston looks over sales information during the Feb. 29 All Breeds Commercial Range Bull Sale in Houston. He purchased one hereford bull for his Waco Creek Ranch in San Saba. ( Melissa Phillip / Houston Chronicle )

Numbers were down, with about 9 percent fewer livestock entries for commercial sales. And bidding was soft, despite record-high market prices for calves, which should have driven up demand and prices for prime breeding cattle, ranchers said. Instead, the average sale price for the first auction, the all-breed range bull sale, finished at $3,001, about on par with a year ago.

“It’s still clouding our thinking,” J.D. “Bubba” Sartwelle Jr., sales manager for the events, said of the drought. “It’s made us cautious.”

Commercial auctions are in many ways the heart of the Houston Livestock Show and Rodeo – the sources of the real-world business transactions around which the original Houston Fat Stock Show and Livestock Exposition was organized 80 years ago.

Today, little fanfare surrounds the events, which involve a whirl of fast-paced bidding and take place off to the side of a massive carnival and rodeo exhibition featuring star performers, leaving few to notice the deep implications of extreme dry weather that have found their way into one of Houston’s dearest traditions.

Some sold their herds

But a historic drought in Texas last year, which has left more than half of the state still facing exceptional or extreme drought conditions, decimated grass and forced a surge in demand for hay and other feed. The result was soaring feed prices.

Most ranchers faced difficult choices. Many simply could not afford to buy hay or other feed for their herds, selling off as many as half of their cows, or getting out of the business altogether.

“I’ve sold off all my old cows, culled every cow that I could, and I’ve sent off half of my cows to Nebraska,” said Bill Breeding, of B & C Cattle Co. in Miami, Texas.

State inventory dips

With his herd downsized by half, he paid to lease the land in Nebraska, hoping that the sizeable expense would produce healthier cattle who could benefit from a warmer climate with more grass and be sold in a market with low supply, Breeding said.

While Texas leads the nation in cattle production, accounting for 11.9 million cows and calves, the state’s inventory fell 11 percent in the last year to its lowest level since 1968, according to an annual report released Jan. 1 by the U.S. Department of Agriculture.

Many ranchers felt torn during the auctions, coming after a year when they had to struggle to determine how many cattle they could support with increased feed prices and little moisture.

Cattle prices have been strong and will likely continue to increase because of rising world demand for meat, ranchers said. So gambling a large sum to bid on a high-quality bull, which would improve herd quality through breeding, could help bruised companies recover through sales in a market with little supply.

65 companies bid

“We’re going to be able to market that offspring for the highest prices ever,” said Shannon Theeck, of Delta T Cattle Co. in Brenham, who was in the market for a bull.

But a purchase on a bull would involve an investment in expansion during a time where ranchers have remained wary of poor ground conditions. Another dry summer could result in further losses, making a pricey bull a risky bet, although with a large potential payoff.

Sixty-five companies were optimistic enough to bid on and buy the 99 bulls up for sale Wednesday. The rest of the 200 registered bidders at the event watched with interest.

“They don’t know what to think,” said John Coleman Locke, of J.D. Hudgins, Inc., a Brahman cattle producer based in Hungerford. “It’s like the whole thing has been turned upside down. We really don’t know what to expect.”